IFRS ( International Financial Reporting Standards )

What is IFRS?

International Financial Reporting Standards (IFRS) are set of standard rules and regulations introduced by the International Accounting Standards Board (IASB). The main objective behind the introduction of IFRS was to increase consistency, transparency and comparability of financial statements around the globe.

What is IASB?

IASB or International Accounting Standards Board is a London based autonomous body that came into existence in 2001 with the aim of developing the International Financial Reporting Standards (IFRS). IASB replaced the International Accounting Standards Committee (IASC) that was previously given the responsibility to establish international accounting standards (IAS). In 2010, IASB announced the Conceptual Framework for Financial Reporting to provide a basic understanding of accounting practices under IFRS.

Advantages of IFRS

Here are some of the major benefits of IFRS:

Widely accepted: Financial statements created as per IFRS are widely accepted as IFRS are adopted by 144 jurisdictions out of 166.

Comparability: As IFRS are set of rules that are widely accepted so it helps an individual to compare different companies of different nations following IFRS can be easily compared.

Extended Guidance: IFRS gives guidance relating to the applicability of various principles given in standards as per the situation.

Amendment in standards: In a case, if there are changes in the economy, IFRS can be amended according to such economic changes.

IFRS Standard Components

The scope of IFRS covers a broad range of accounting practices. IFRS set compulsory rules for some business practices such as

Balance sheet or financial position statements: IFRS impact the manner according to which the components of a balance sheet are reported.

Statement of Profit and loss or Income or expenditure statement: The parts of such statement are influenced as per the set of rules set by IFRS.

Cash flow statement: This report shows the operating, financial and investing activities of the company in the given period.

A company shall also provide its accounting policies summary along with the above-mentioned financial statements. The reports formed are compared with the preceding report to analyze the changes to make the necessary decision.

List of IFRS and IAS

Before IFRS, IASC had already issued International Accounting Standards (IAS) that was introduced between 1973 and 2001. Here is the list of IAS and the IFRS as they both are applicable in the current scenario:

IFRS/IAS

Particulars

IFRS 1

International Financial Reporting Standards for first adoption of IFRS

IFRS 2

International Financial Reporting Standards relating to share based payments